What is a reverse split?
-A ‘Reverse Split’ (or R/S, RS) is a method by which a company reduces the number of shares on the market and increases the stock price proportionally. Reverse splits are done at a specific ratio: ie – 10 for 1, or 10:1. This ratio would mean that if a shareholder held 1000 shares at 1 cent, after the reverse split the shareholder would be left with 100 shares at 10 cents each. The value of the position does not change from the reverse split… at least not directly from it. Companies usually do a reverse split to increase the price of the stock to more attractive levels, or to remain at a minimum price for a particular exchange. While not necessarily a bad thing, a R/S is a popular method that bad penny stock companies use to continue raising capital through dilution. ‘Dilution’, if done enough, will eventually leave a stock virtually worthless. The price may go as low as .0001 dollars, the minimum that stocks are tradable by common investors. At this point the company can no longer e
